MICRO-CREDIT LENDING PROGRAMS
and their role in Tibetan development

Micro-credit lending has received wide publicity and consequently is very trendy now in the development community.  Nevertheless, it is not suitable for every population.  Some important factors to consider are:

• Is there a strong social network that will help obligate borrowers to repay their loans?
• Do the borrowers have sound business ideas that will produce sufficient profit to enable them to make repayments?
• Is the target population willing to accept the risk of trying new ventures?
• Is the target population interested getting capital in the form of a loan from an outside source?

Kham Aid Foundation’s experience in working with Tibetan populations in Kham has produced mixed answers to these questions.  While Tibetan community networks can be quite strong when led by influential religious authorities, we have encountered a number of instances when rivalries and feuds undermined social ties between neighbors.  Without strong social cohesion and/or oversight from a respected local leader, repayment is difficult to guarantee.

When it comes to developing business ideas, we have observed that many rural Tibetans have too little experience of the outside world to come up with new and unique business models; they usually prefer imitate successful enterprises that already exist in their community.  This leads to market saturation and diminishing profitability for late-joiners.  Significant assistance is therefore needed to train Tibetan entrepreneurs in new types of businesses.  Often, training is the key factor; capital is secondary.  As a result, Kham Aid Foundation is operating a number of vocational training programs that allow entrepreneurial Tibetans to fill previously unoccupied market niches.

On accepting risk, rural Tibetans, we have found, are generally very risk-averse.  For example, while the Chinese government has offered a variety of programs to encourage agricultural diversification and increased planting of cash crops, most Tibetans stick to traditional crops of barley, wheat, potatoes, turnips, etc.  They often resist enrolling in a training course unless a daily stipend is paid during the training period to mitigate the cost of missing out on itinerant labor jobs and other income opportunities.

Finally, when it comes to taking out loans, many Tibetans are aware that there is such a thing as a grant that comes from NGOs with no strings attached.  Tibetans who are aware of this possibility will usually state that they much prefer grants to loans.

Thus, while it would be foolish rule out microcredit lending entirely, we at Kham Aid Foundation have not heard of such programs being successfully operated in Tibetan areas by other organizations; moreover our experience has been that Tibetans who make good candidates for micro-credit loans are hard to find.

One exception is our greenhouse lending program.  This proved successful because of a highly motivated borrowers bolstered by generous support from the Xinlong country government. Ultimately, however, the profit obtained from growing vegetables proved inadequate to meet the maintenance costs of the greenhouses.  As storms and hail gradually took their toll, some greenhouses had to be retired.  Others are still in use but their ultimate sustainability is in doubt.

In sum, we have found few opportunities to offer viable micro-credit lending programs in Kham.  Kham Aid Foundation will continue to seek out interested Tibetans.  When we find them, we’ll certainly look for a way to help.